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  3. Cut in gold import duty to help contain smuggling, boost exports: CBIC Chairman

Cut in gold import duty to help contain smuggling, boost exports: CBIC Chairman

25 Jul 2024 Evaluate

The Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal has said that the government’s decision to cut too high import duty on gold will help in containing smuggling and boost the country's exports of gems and jewellery.  The Budget has announced a drastic cut in import duty on the precious metal to 6 per cent from 15 per cent. He said that the duty was hiked in July 2022 as at that time there was a worsening current account deficit (CAD) due to the geo-political situation. To cut down on the non-essential imports, the duty was increased. 

CBIC Chairman stated that in the last financial year, seizures of gold made by Customs formation and the DRI together were around 4.8 tonnes, up from 3.5 tonnes in 2022-23. CAD in 2022-23 was 2 per cent of GDP, which came down to 0.7 per cent in 2023-24. In the March quarter, it was a surplus. Gold is the raw material used in the gems and jewellery sector where a lot of employment is generated. He said that almost 50 lakh people are employed and exports are to the tune of 8 per cent from this sector. He said if the rate of duty remains very high that blocks the capital for manufacturing the jewellery and value addition that happens in the country. 

He also said it was noticed that after the duty was hiked to 15 per cent, the importers resorting to bringing the gold in other than bullion form also under various free trade agreements (FTAs) to escape the levy. He said ‘this subterfuge was also resulting in not realising the full impact of the customs duty and we also noticed that there was a rise in smuggling of gold’. With 15 per cent duty, there is a huge arbitrage between the domestic prices of gold and the international prices. All these factors kept in mind in the Budget proposal of reduction of duty on gold and precious metal where the duty move in tandem with the rate of duty on gold.


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